RBA governor justifies interest rate hold
The Reserve Bank of Australia (RBA) has left the cash rate on hold at 4.35 per cent today, with experts split on how soon mortgage holders can expect interest rate relief.
In its post-meeting statement, the RBA board said inflation was moderating in line with its latest forecasts but "remains high", warning the "economic outlook remains uncertain".
"The headline monthly CPI indicator was steady at 3.4 per cent over the year to January, with momentum easing over recent months, driven by moderating goods inflation," the board said.
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Inflation remained steady in the 12 months to January, unchanged from December. The RBA expects inflation will fall to its 2-3 per cent target range in 2025 and reach the midpoint in 2026.
The Chinese economy is slowing and the board noted the "high level of uncertainty" around the implications that, or even conflicts in Ukraine or the Middle East, meant it would not "rule anything in our out" in terms of future interest rate hikes or cuts.
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"The board will rely upon the data and the evolving assessment of risks. The board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market," it said.
However, economist Stephen Koukoulas told Yahoo Finance a subtle change in the central bank's wording could be a sign cuts are closer than many are predicting.
"No longer did it say that it considered increasing interest rates. Rather it moved to a position where in reference to the outlook for policy it “would not rule anything in or out”," Koukoulas wrote.
In other words, there was, at this stage, an even risk that the next move interest rates would be down as well as up."
In her second address after a board decision, RBA governor Michele Bullock expressed the need for "much more confidence" that inflation was back into the target band to consider a rate cut.
“The central forecast have it not coming back into the band until 2025. If we were to see some acceleration and get some more confidence that we are over-achieving there then possible rate cuts might be something on the agenda," Bullock said.
“At the moment we are not seeing that and we are in a position where we are cautious and want to wait and see.”